With tighter profit margins putting more pressure on the farm balance sheet, knowing your exact cost of production has never been more important. That’s why a new Indiana Cost of Production Calculator has been developed to help farmers make more informed marketing and management decisions.
“The calculator slowly walks a producer through all of the cost categories, and instead of giving all of the infinite amount of potential things you could enter, there’s numbers that should be representative of Indiana region. So a farmer can just say, yes, I agree, that’s my cost of production. Or they can go deeper into sort of getting into specific line items within the cost categories.” Says Chad Fiechter, Assistant Professor of Agricultural Economics at Purdue University
He says the free interactive tool allows producers to estimate their cost of production by region, calculate breakeven prices, and see how changes in crop yields or commodity markets can impact profitability.
“The hope is to get the nuance of each farm reflected in an individual, specific cost of production. Everybody has a different way of farming, which is fantastic, and an average is really good. But when times are tight and you’re trying to make decisions about marketing or if you want to do additional capital expenditures, it’s really nice to have confidence that your specific numbers are represented in how you’re thinking through your financials,” says Fiechter.
As input costs remain elevated and grain prices fluctuate, accurate cost accounting can be one of the most valuable management tools on the farm.
